"for having renewed research in economic history by applying
economic theory and quantiative methods in order to explain
economic and institutional change."

Modern economic historians have contributed to the development of
economic sciences in at least two ways: by combining theory with
quantitative methods, and by constructing and reconstructing
databases or creating new ones. This has made it possible to
question and to reassess earlier results, which has not only
increased our knowledge of the past, but has also contributed to
the elimination of irrelevant theories. It has shown that
traditional theories must be supplemented or modified to enable
us to understand economic growth and change. Economic historians
often consider far reaching problems, the estimation of which
demand an integration of economics, sociology, statistics and
history. Robert Fogel and Douglass North are the economic
historians that have come furthest in such a scientific
integration. They were pioneers in the branch of economic history
that has been called the "new economic history", or cliometrics,
i. e. research that combines economic theory, quantitative
methods, hypothesis testing, counterfactual alternatives and
traditional techniques of economic history, to explain economic
growth and decline. Their work has deepened our knowledge and
understanding within fundamental areas of research, as to how,
why and when economic change occurs.

Robert Fogel's foremost work concerns the role of the
railways in the economic development of the United States, the
importance of slavery as an institution and its economic role in
the USA, and studies in historical demography.

Douglass North has studied the long term development of
Europe and the United States, and has in recent work analysed the
role institutions play in economic growth.

Robert W. Fogel's scientific breakthrough was his book
(1964) on the role of the railways in the American economy.
Joseph Schumpeter and Walt W. Rostow had earlier, with general
agreement, asserted that modern economic growth was due to
certain important discoveries having played a vital role in
development. Fogel tested this hypothesis with extraordinary
exactitude, and rejected it. The sum of many specific technical
changes, rather than a few great innovations, determined the
economic development. We find it intuitively plausible that the
great transport systems play a decisive role in development.
Fogel constructed a hypothetical alternative, a so called
counterfactual historiography; that is he compared the actual
course of events with the hypothetical to allow a judgement of
the importance of the railways. He found that they were not
absolutely necessary in explaining economic development and that
their effect on the growth of GNP was less than three per cent.
Few books on the subject of economic history have made such an
impression as Fogel's. His use of counterfactual arguments and
cost-benefit analysis made him an innovator of economic
historical methodology.

Fogel's painstaking criticism of his sources, and his use of the
most varying kinds of historical material, made it difficult for
his critics to argue against him on purely empirical grounds. As
Fogel has stressed, it is the lack of relevant data rather than
the lack of relevant theory that is often the greater problem for
research workers. Fogel's use of counterfactual analysis of the
course of events and his masterful treatment of quantitative
techniques in combination with economic theory, have had a
substantial influence on the understanding of economic
change.

Fogel's second work of importance (1974), which aroused great
attention and bitter controversies, treated slavery as an
institution and its role in the economic development of the
United States. Fogel showed that the established opinion that
slavery was an ineffective, unprofitable and pre-capitalist
organisation was incorrect. The institution did not fall to
pieces due to its economic weakness but collapsed because of
political decisions. He showed that the system, in spite of its
inhumanity, had been economically efficient.

His exceedingly careful testing of all possible sources and his
pioneering methodological approach have allowed Fogel to both
increase our knowledge of an institution's operation and
disintegration and to renew our methods of research. Both his
book on the railways and that on slavery have forced researchers
to reconsider earlier generally accepted results, and few books
in economic history have been scrutinised in such detail by
critical colleagues.

Fogel's third area of research has been economic demography, and
in particular the changing rate of mortality over long periods of
time and its relation to changes in the standard of living during
recent centuries. This project is less controversial than the
other two, and is both interdisciplinary and international, with
fellow workers from many countries. His conclusion is that less
than half of the decrease in mortality can be explained by better
standards of nourishment, before the breakthroughs of modern
medicine. This leaves the greater part of the decline
unexplained. According to Fogel, a systematic analysis demands an
integrated study of mortality rates, morbidity rates, food intake
and individual body weights and statures. A combination of
biomedical and economic techniques is required to achieve this,
something that he has at present set about accomplishing. It is
already apparent that his analyses will affect research in
economic history at many levels.

Douglass North presented in 1961 an explanatory model for
American economic growth before 1860, that came to affect the
direction of research not only in the USA. Starting from an
export base model he had previously formulated himself, North
analyses how one sector (the cotton plantations) stimulated
development in other branches, and led to a specialisation and
interregional trade.

In 1968 North presented an article on productivity in ocean
shipping, which has become one of the most quoted research works
in economic history. In this article he shows that organisational
changes played a greater role than technical changes. North has
more and more pointed out that economic, political and social
factors must be taken into account if we are to understand the
development of those institutions that have played a role for
economic growth, and how these institutions have been affected by
ideological and noneconomic factors. North maintains that if
political economics is a theory of choice under certain specific
assumptions and restrictions, then the purpose of economic
history is to theorise about the development of these. North has
pointed out that there is a risk that economic analyses may
become ahistoric if the time factor and the conflicts in society
are not taken into account. A systematic reintroduction of
institutional explanations in the historic analysis is an attempt
to correct this deficiency.

In a number of books (1971, 1973 and 1981), North demonstrated
the role played by institutions, including property rights. He is
one of the pioneers in "the new institutional economics". Putting
it simply, North maintains that new institutions arise, when
groups in society see a possibility of availing themselves of
profits that are impossible to realise under prevailing
institutional conditions. If external factors make an increase in
income possible, but institutional factors prevent this from
happening, then the chances are good that new institutional
arrangements will develop. North tested his hypotheses on
development in the USA during the nineteenth century, and showed
how agricultural policy, banking, transport, etc. could be
explained by the institutional arrangements. In a following book,
he considered the economic development of Western Europe from the
middle ages to the eighteenth century, and showed that economic
incentives, based upon individual property rights, were a
prerequisite for economic growth. Changes in relative prices and
fluctuations in population growth led to institutional changes.
The speedier industrialisation in England and the Netherlands
depended upon the fact that certain conservative institutions,
such as the guilds, were weak. Private property rights were also
guaranteed in these countries, as opposed to the case of Spain
where the lack of institutional innovation led to a century long
stagnation. Innovations, technical changes and other factors that
are generally regarded as explanations, are not considered to be
sufficient by North. They are themselves a part of the growth
process and cannot explain it. Effective economic organisations
are the key to economic change. "Institutions are sets or rules,
compliance procedures, and moral and ethical behaviour of
individuals in the interest of maximizing the wealth or utility
of principals".

In his latest book (1990), North poses the fundamental question
of why some countries are rich and others poor. "Institutions
provide the basic structure by which human beings throughout
history have created order and attempted to reduce uncertainty in
exchange. Together with the technology employed, they determine
transaction and transformation costs and hence the profitability
and feasibility of engaging in economic activity." Greater
institutional changes occur slowly, since institutions are the
result of historical change, which has moulded individual
behaviour. The greater the institutional uncertainty, the greater
become the transaction costs. The lack of opportunity of entering
binding contracts and other institutional arrangements is a cause
of economic stagnation, both in today's developing countries and
the former socialistic states. North has tried to explain the
difficulties that meet these countries by focusing his analysis
on the political and legal framework for economic growth. In his
book he poses fundamental questions concerning the connection
between economic change, technical development, and institutional
conditions. He shows both the difficulties that neo-classical
theory has had in explaining growth, and the strength of using
this theory in combination with the approaches he has proposed,
North has forced economists to rethink, to be conscious of when
economic "laws" are sufficient as an explanation of a given
problem, and of when other factors must be taken into
account.

North has, like Fogel, inspired a large number of research
workers. His persistent stressing of the importance of stringent
theory, together with his emphasis on the role of institutions,
has influenced not only economic historians, but also economists
and political scientists. Fogel is an empiricist, who never
leaves any sources unexplored. North can be compared to those
prize winners who have previously received the prize for purely
theoretical works. North is an inspirer, a producer of ideas, who
identifies new problems and shows how economists can solve the
old ones more effectively.

Fogel and North have thus in different ways
renewed research in economic history, by making it more stringent
and more theoretically conscious.